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Volume of Outsourcing

August 12, 2009
What is Outsourcing?
Technically outsourcing is the process through which a company hands over part of its work to another company. In this process the new company is totally in charge of the designing and implementing of the business process with guidelines of requirements from the outsourcing company. In other words, the outsourcing company orders a product that is tailor made for it by the service providing company or the service provider. This product fits into the customer’s overall business plan.

This process is beneficial to both the parties involved as it releases the outsourcing company from the headaches of rolling out the business process and the establishment costs involved. The service provider on the other hand specializes in that service and already has the infrastructure and the expertise, and is therefore able to utilize it to the maximum. There are two principal types of outsourcing; traditional and greenfield. In “traditional” outsourcing, the company ceases to perform the job and out sources it to the service provider. In such a case the company lays off or re-employs the staff related to the shifted process. New jobs are now created at the end of the service provider who employs new people to do the job. In “greenfield” outsourcing, the company changes its business processes without leading to any hiring of personnel by the service provider.

What is BPO?

BPO or Business Process Outsourcing is not simply another term for outsourcing. It involves creating strategic value through outsourcing by creatively examining the process and changing the way it is actually performed and is therefore more than just changing hands. Here, the supplier not only takes on the responsibility to take over the function or business process, but also to reengineer the way it is done. That includes either applying new technology or applying the existing technology in a new way. As a result, something about the way the process is currently being done gets fundamentally changed even though considerations of how the new process affects the buyer’s company and interacts with other departments and functions in it. BPO often increases a company’s shareholder value.

What is a BSP?
A BSP or a Business Service Provider, is an outsourcing service provider that offers scalable BPO services through the Internet

India too out sources
Though there seems to be so much controversy surrounding outsourcing to India, India herself seems to have matured into outsourcing. Some of the best and biggest Indian companies are outsourcing not just any old jobs but strategic IT functions to some of the best in class global companies. Strategic outsourcing is in fact the fastest growing segment in the Indian IT market, say industry experts. So far the outsourced deals have mainly been to companies of foreign origin who have set up office in India, so the jobs still remain in India. Among the notable deals struck are those between Bank of India and Hewlett-Packard, Dabur India Limited and Accenture , and Manipal Academy of Higher Education and Hewlett-Packard India Sales. There is however the case of Tata Counsultancy Services (TCS), one of India’s largest exporters of software, that has begun to offshore its staff. According to reports, by 2005 TCS plans to have 3,000 (15% of its global workforce) software engineers in China.

The Shift from other Nations
Cheap labor is available in many parts of the world but it does not come with the maturity that India has gained over the years having entered the field early. Many companies in India have scored a Level 5 rating from Carnegie Mellon’s Software Engineering Institute, the highest international standard a software company can achieve. In fact of the 70 or so companies in the world that have earned this designation, half are from India. That does not leave much choice to outsourcers. The Indian market is also a tried and tested market so newer jobs are coming to India, but more than that, it is the growth in the value chart that has endeared customers to India.

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